Line a baking sheet with parchment paper or a silicone mat and set aside.
Preheat the oven to 350 F. (177 C).
In a large mixing bowl, cream together the butter, cream cheese, vanilla, and sugar. Mix well by hand or with a hand mixer. Add the eggs and mix just enough to combine - take care not to overmix.
In a separate large bowl, combine the baking powder and flour, mixing well to incorporate. Add the flour into the egg mixture and, using a rubber spatula, gentle stir it in by hand; lifting and folding until a shaggy, sticky dough forms. Adding more flour if necessary.
Add the dough to a lightly floured a work surface and to knead for 10 full minutes, adding more flour as necessary. Take care to scrape clean your work surface and hands, periodically, if there is excessive dough stuck to either, as this will help to form a dough that is smooth. The finished dough should be slightly sticky, but not so sticky that it can't be handled. (see video in post and recipe notes below for more detailed information)*
Form the dough into a large smooth ball and set aside. Scrape your work surface clean of any stuck-on dough before rolling out the knots.
To begin making the knots, pull a piece of dough about the size of a walnut. Roll between your palms into a ball and then, on your work surface, roll the dough down toward you and out with your fingers to form a strip (about 5-inches [13-cm] in length, and approximately as thick as your finger) and tie into a loose knot.*
Place each knot onto the prepared baking sheet, leaving space between each one as they will bake up a little larger. Wrap the remaining dough in plastic wrap and keep at room temperature between batches.
Bake for 14-15 minutes - do not overcook. The cookies will only tan on the bottom, they will not turn slightly golden on top. Cool completely on a baking rack.
Icing:
In a medium bowl, squeeze the lemon juice (or optional Anisette and juice of an orange) and combine with confectioner's sugar, mix well until smooth. Using as much sugar as is needed to make the icing thick. Icing will always run off the knot, so you don't want it too thin. Be sure to place wax/parchment paper or foil under the racks to catch the droplets.
Dip the top of a completely cooled knot into the icing, allowing much of the excess to drip back into bowl. Place the iced cookie onto the rack and proceed with another cookie in the same manner. Ice a few cookies at a time before proceeding to add a pinch of rainbow nonpareils on top.**
Alternatively, (this is often what my grandmother did for us grandkids) after dipping the cookies into the icing and allowing the excess to drip off, dip the cookie straight into a bowl of rainbow nonpareils for a more "loaded up" cookie and set on the rack to fully dry.
After the icing is thoroughly dry and has hardened, turn the knots over and let any icing dry that may have accumulated on the underside.
Store at room temperature in air tight containers. Cookies will last for a few days.
Notes
*The perfect dough will be slightly sticky to the touch, but not so sticky that it leaves remnants of dough behind. It should pull away easy and clean from your hands and work surface. See short video in post demonstrating the perfect texture for rolling into knots. Also there is a "Highlights" tab on my Instagram page with more video demonstration regarding icing.Note that even when the dough feels "just right" continue to knead and develop it a few more times to check, it may begin to stick to your hands and work surface again, that's ok, just add a little more flour, knead a few more times and check again. Slightly sticky dough is important to create the perfect knot. An overly floured dough will create a dough that will be far too slippery and dry to roll, conversely, if it is too sticky forming a knot will be difficult. Take your time and add a little flour at a time when kneading. Remember these cookies are on the slightly drier side after they've baked anyway, as they're supposed to be, but don't compromise the integrity of the cookie with more flour than is needed. A good rule to follow is a little more flour at a time, knead, and go from there.**If the icing is still quite wet and drippy, the sprinkles may slide and bleed, give the icing a few seconds to stop dripping before adding sprinkles.